The Ascension and Downfall of Pizza Hut: A Corporate Saga

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Written By David Jay
A future med student, I write to learn.
Pizza Hut is one of the most recognizable pizza brands in the world.

In the modern age, the fast food market has dominated the culinary industry due to its speed, convenience, and affordability. According to the Barbeque, over one-third of American adults on any given day enjoy pizza. Recognized by millions across the globe for its iconic shape and flavors, many pizza-making brands have perfected their renditions, ranging from Domino’s, Papa John’s, to Little Caesars; but no one took the slice like Pizza Hut.

Being known for its iconic menus, Pizza Hut has conquered the pizza empire for over three decades. During its reign, the company has pioneered many services within the industry to appeal to the ever-changing demographic. With a little over 19 thousand outlets in 160 countries in 2022, it has proven itself to be a significant player in the economy, with one billion dollars in annual profits. However, its crown was passed onto other brands like Domino’s due to the lack of improvements. Despite this, there is potential that Pizza Hut will make a comeback in the pizza industry with modernized business models.

Baked In A Hut

The building of the first Pizza Hut outlet in Wichita, Kansas, is how the Carney brothers came up with their company’s name. (Source: Hut Life)

The story of Pizza Hut began in 1958 when a real estate agent approached Dan and Frank Carney with a proposition. The agent with an unrented brick hut convinced the Carnies that a pizzeria on his plot would be ideal. The brothers found the business to be promising, as there was constant demand for inexpensive meals for students, and pizzas were affordable to make. Moreover, the location is within a campus, attracting local customers, and pizza parlors themselves are a rarity. With this in mind, the brothers borrowed $600 (equivalent to more than $6,340 in 2022) from their mother to purchase the hut, equipment, and ingredients.

The name “Pizza Hut” came from how the brothers wanted to focus their business on only pizzas, how the store was in a brick hut, and how the sign only had a place for eight letters. On May 31st, 1958, the brothers founded the first Pizza Hut location within the Wichita State University campus in Wichita, Kansas.

On the first day of their business, the brothers gave away free meals to customers, building their first customer base. Despite the slow incline, the brothers’ business managed to gain popularity because of their special recipes, fresh ingredients, and comfortable atmosphere. As their business grew, the Carnies proceeded to open their first franchise in Topeka, Kansas, in 1959.

Throughout the 1960s, Pizza Hut employed aggressive marketing, a type of advertisement that directly engages with potential clients, to promote their chain. The campaign resulted in 145 more units being established throughout the United States in 1966. 

The first Canadian Pizza Hut opened in 1968, followed by the establishment of the International Pizza Hut Franchise Holders Association (IPHFHA), which allowed the acquisition of franchises. However, due to the different accounting systems used by different acquirers, Pizza Hut spent eight months merging all systems as sales plateaued and profits decreased.

Red Roofs

Pizza Hut is iconized for its unique red roof, which was conceptualized in 1969. (Source: Hut Life)

“We about lost control of the operations. Then we figured out that we had to learn how to plan.”

– Frank Karney on the rapid growth of Pizza Hut in 1972

The Carney brothers were concerned about how to fight competitors as their company grew internationally, so they came up with creative ways to be unique. The Carnies contacted Richard D. Burke, a college friend, and architect, to help come up with a building that would make Pizza Hut recognizable. According to Hut Life, an architect who cooperated with Burke stated that the red roof design was “a fusion of common sense, the architectural taste of the 1950s, and a need for the design to be both remarkable and appealing in a variety of locations.”

As the company grew rapidly, Frank Carney stated that old business practices, such as annual reports, were inadequate for the company, so he decided to revise the company’s business model to be sustainable in the future. Frank Karney built the model to prioritize profits and sales over providing adequate financing and growth. Additionally, expansion is a key concern in the emerging market. Karney’s decision also attracted the attention of PepsiCo, Inc.

In 1970, Pizza Hut expanded its operations to Germany and Australia, and there were more than 500 branches within the United States. According to the number of franchises and sales, Pizza Hut became the largest pizza company in 1971. A year later, Pizza Hut gained a listing on the New York Stock Exchange, allowing investors to support the company. The company furthered its acquisitions and expansions in many countries throughout the 1970s.

Advertisements played an important role in establishing Pizza Hut’s public profile and introducing new customers to the chain. According to Reference for Business, expenditures on advertising increased from $942,000 in 1972 to $3.17 million in 1974. 

PepsiCo formed a merger with Pizza Hut in 1977 due to its potential to expand outside of the US and its rapid growth. Moreover, sales reached $15 million in the same year. As the fast food industry blossomed in the 1970s, people began to favor the convenience and inexpensiveness of fast food.

Red Flags

Pizza Hut’s “Pan Pizza” is an iconic menu that originated from the 1980s century. (Source: Food & Wine)

The 1980s introduced Pizza Hut to numerous competitors in the fast food market, for example, Domino’s, Little Caesars, and Papa John’s, leading to Pizza Hut’s attempts to raise its public profile. 

One of the most notable schemes was the “Pan Pizza.” Delightfully, the pizza was cooked in a pan instead of a tray. The addition to the menu became a sensation among customers due to its crustier texture, lowered greasiness, and thinner crust. Moreover, a Pan Pizza requires under five minutes of preparation, allowing staff to serve customers quickly, especially during rush hours. An extension to the menu was made in 1983 when the “Personal Pan Pizza,” Pan Pizza with customizable toppings, was introduced. A mentionable addition is the “Hand-tossed Traditional Pizza,” originating in 1988.

1986 marked the 5,000th Pizza Hut outlet was established and brought on the debut of the company’s home delivery service. According to Reference for Business, 25% of Pizza Hut’s sales accounted for takeaways and deliveries during the 1990s. 

Pizza Hut Express outlet located at Miami International Airport (Source: MIA)

Opposition within the United States heightened as McDonald’s, a major fast food chain, introduced its new product, the McPizza in 1991. Competing with a major chain such as McDonald’s is no easy feat, so Pizza Hut needs to stay relevant by following public demands. Throughout the 1980s and early 1990s, Pizza Hut incorporated other types of dishes, for example, pasta, salads, and desserts to add more variety to their product. Furthermore, as the public health consciousness rose during the mid-90s, Pizza Hut advertised their vegetarian toppings and healthy ingredients to provide a healthy alternative to other brands of pizzas. 

The early 1990s also saw a rapid increase in convenience and accessibility across the fast food industry with drive-throughs and delivery services emerging from companies. A strategy that Pizza Hut utilized to increase accessibility, lower operating costs, and be unique is to form Pizza Hut Express. While almost the same in service, Express outlets have a smaller menu, building size, and price, increasing the affordability of pizzas and lowering functioning costs. Express franchises were established in high-traffic areas where rent is expensive (eg. airports, cafeterias, business districts) so that they can serve as much as possible. 

December 26th, 1991 marks the end of the Cold War, allowing businesses to return to normalcy as food rationings and restrictions subsided. PepsiCo saw a major opportunity to expand to an international audience, especially in the Eastern Bloc where economic sanctions were in place before its dissolution. Moreover, the economic boom would allow customers to purchase more products, increasing the company’s profit margins. By 1997, Pizza Hut had franchised to 90 countries. However, as the company soared in profits throughout the end of the 20th century, rival companies remained competitive.

Rock and A Crusty Place

Pizza Hut’s Stuffed Crust Pizza was created to increase popularity. (Source: USA Today)

In 1994, Pizza Hut’s attempts to modernize resulted in lower sales as customers did not find certain aspects favorable, causing the company to experience the first decline in profits in the last 15 years. Rival establishments reduce the prices of their products to entice consumers, leeching off Pizza Hut’s gradual downfall. 

Roger A. Enrico, the CEO of PepsiCo during the era, devised a strategy to stay on top of the pizza industry: developing new recipes. Pizza Hut’s famous stuffed crust pizza was introduced and heavily promoted in 1995, with success indicated by the 1.4% increase in market shares, 16% increase in market sales, and 40% increase in operating income during 1995. Moreover, Pizza Hut introduced new menus to customers, improved recipes, introduced online delivery, and installed modern ovens, improving the quality and efficiency of a variety of stores during the 2000s. Despite Pizza Hut’s efforts, it started to fall out of the spotlight in the later years due to a variety of factors.

Pizza Hut’s expenditures began offsetting the capital investments in PepsiCo’s other branches. Since PepsiCo has greater assets in the beverage and snack foods division, the company decided to group its restaurant chains and form a daughter company called Tricon Global Restaurants, now known as Yum! Brands.

Competition between pizza companies heightened during the 21st century as customer preferences altered, with consumers prioritizing convenience and affordability. While Pizza Hut is one of the first companies to utilize delivery services, its delivery is inferior to Pizza Hut’s rivals and third-party services, such as Uber. In addition, competitors can accommodate new trends quickly within the fast-food industry, notably healthiness and diversity; Pizza Hut was unable to catch up to them. Artisans and local pizzerias also drained the profits of Pizza Hut as locals preferred homemade products, which often led to franchises canalizing themselves for profits and creating a lose-lose situation.

While Pizza Hut has fully embraced technological changes, its rapid changes have caused the company to lose some customers and profits. Many companies have adopted various technologies to appeal to consumers, such as pinning establishments on Google Maps, modernizing webpages, and applying social media. The global economy also played a part in Pizza Hut’s dethronement, as various recessions caused reduced demand all across the globe, sinking sales and profits.

The Potential

Pizza Hut revealed the e-Pallete, an autonomous delivery vehicle in 2017.

Despite the turmoil, there is still the possibility that Pizza Hut could regain its superiority again. The company continues to address issues and make attempts to renovate the company’s business model and image.

Pizza Hut has been diversifying its menus to resonate with consumers, especially with healthier and vegan options to accommodate health-conscious customers. Moreover, international branches have created their recipes to suit local cuisine as well, for example, Pizza Hut branches in China have the “Durian Pizza’ which is well-received by the locals.

The majority of the establishments are being renovated to have a welcoming atmosphere, better efficiency, and more digital appliances. Furthermore, the delivery services of Pizza Hut were improved to allow deliveries via drones, self-driving vehicles, or third-party services. Sustainability has also become Pizza Hut’s priority, as customers want to do their part to slow down global warming.

Social media has become an essential lifeline for many companies, including fast-food-related businesses, as a way to engage, advertise, and maintain a presence among their customer base. Pizza Hut is no exception, quickly expanding to popular networking platforms such as Twitter, YouTube, or Facebook.

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